Homework Help: Macroeconomics

Posted by Macro_Econo on Friday, February 29, 2008 at 10:26am.

Can someone please help me with this?
Since fall of 2004, rising oil prices have frequently ended stock market rallies and led to declines in all major stock indexes. Draw an AS/AD diagram which shows the effect on the US macroeconomy of oil at a high price such as $100 per barrel versus oil at a moderate price such as $50 per barrel. Label axes and AS/AD lines on your diagram clearly and explain how higher oil prices impact either AS, AD or both

Thanks.

Macroeconomics - economyst, Friday, February 29, 2008 at 1:23pm
Energy is an important input to the production of many goods. When the price of oil drops, what should happen to aggregate supply? That is, at any given price will producers be willing to sell more, less, the same??. Shift your supply curve accordingly.

Now then, dropping oil prices should have an income affect on demand. If the price of oil (and subsequently gasoline) drops, you will obviously buy more gas. But will you also have more money to buy anything else? If yes, what does that imply about aggregate demand? Shift your demand curve accordingly.

Take it from here.

Answer this Question

Related Questions

stats - since the stock market began in 1872, stock prices have risen in about ...
Business Management - I have just came across the words product-led and market-...
Finance - Suppose you are considering two investments, stock A and stock B. The ...
Macroeconomics - real GDP growth - I have graphed the real GDP growth over the ...
Economics M/C - Hi, I am having difficulty determining the answer for the ...
Macro econ - How might a “perfect” macro equilibrium be affected by (a...
Macroeconomics - Cranberry productions in Mass totaled 1.8 million barrels in ...
finace - 15. Suppose that the following version of the APT is a good model of ...
Economics - Hello, I'm kind of struggling with this question. Can someone ...
Business Fin - The market’s required return on Gitche Gumee Oil Company ...

For Further Reading

First Name:
School Subject:
Answer: